Memorandum by the Assistant Secretary of State for American Republic Affairs (Braden)89

Ambassador Cooper telephoned me yesterday morning with reference to his telegram No. 1251.90 He said that the Montero proposition could not possibly pass the Congress. Therefore, the President would not resubmit it to the legislature. Instead, the Peruvians were suggesting a debt settlement on the basis of 47 years instead of 70 years, 2½ per cent interest instead of 3 per cent interest, alleging that Peruvian finances were in such poor shape that they could do no better. Cooper was anxious to get my approval to this change in plan, although he had made it clear that this had not been a formal offer.

In replying, I told him that, of course, we have nothing to say in the matter which was entirely up to the Foreign Bondholders Protective Council and, while I would talk to Mr. Rogers, I was extremely doubtful that they could possibly accept such an offer. On the other hand, I said that if they were willing to make some sort of an arrangement whereby 2½ per cent would be a minimum but that in good years the rate could go up to 3 or even 4 per cent, or that still better they issue noninterest-bearing scrip for the difference between 2½ per cent and 3 per cent, then I thought there might be a chance to get a meeting of the minds. The Ambassador said that he is having a meeting with the Finance Minister and the Bank shortly and would advance these latter ideas.

I immediately called Mr. Rogers and informed him of the foregoing information. He replied that he had not consulted with any of his associates in the Council excepting Dana Munro, Vice President thereof. Therefore, he did not have authority to speak but he knew that the Council would like to hold to something that looks like 3 per cent (sic), and seemed to be well impressed with my counter suggestions to Cooper. What he particularly wished to avoid was any “unilateral scheme”. He said that when one got below 3 per cent, he was in the realm of those who would not pay their debts (sic).

Mr. Rogers promised that after consulting his associates he would call me back.

Spruille Braden
  1. Addressed to ARA: Mr. Briggs and Mr. Trueblood; to A–Br: Mr. Smith; and to NWC.
  2. December 12, supra.